Deadbeat Illinois: State’s unpaid bills zap pharmacies’ cashflow

Pharmacies are not immune to the state’s backlog in vendor payments, but the formation of a new Medicare plan has helped smaller shops keep their doors open.

Inside: About this series, by the numbers

Joe Ward

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Pharmacies are not immune to the state’s backlog in vendor payments, but the formation of a new Medicare plan has helped smaller shops keep their doors open.

With the creation of Medicare Part D, pharmacists filling some public aid prescriptions now get paid through an insurance company, which is easier to work with and more prompt with payments, some pharmacists said.

Of the $6.5 billion in backlogged payments to various agencies and private business, Illinois owes the medical industry more than $2 billion. Pharmacists are owed $377 million from the state for filling Medicare and other public aid prescriptions.

The delayed payments have hurt pharmacies, especially the mom-and-pops, some of which have a substantial amount of their business tied to public health care plans.

Quite a few of the stores have qualified for expedited pay and are reimbursed faster than other vendors waiting on the state. But that designation has not cured the pharmacies’ problems.

Walgreens can withstand a deferred payment for longer than an independent shop because its business isn’t wholly dependent on prescriptions, said Garth Reynolds, executive director of the Illinois Pharmacists Association.

“It especially hurts the locally owned stores who can’t spread the debt to other departments or even other locations,” he said.

George Burgland, owner of Burgland Drug Store in Galesburg, said his outstanding bills with the state once totaled $150,000. His business saw some relief after 2006, when Medicare Part D went into effect.

Part D subsidizes drug prescriptions for Medicare enrollees, but the payment for those prescriptions now comes through a private insurance company. Burgland said three-fourths of Medicare patients he sees are enrolled in Part D.

“That simplified my life quite a bit,” he said. “It took the state out of being the primary and onto someone who has to pay more promptly.”

Burgland said the most he is out now is $25,000.

What about the irony that insurance agencies are easier to work with than the state?

“Illinois is Illinois,” Burgland said. “If that’s the way it is, you just have to deal with it.”

Because his business is about 95 percent prescription based, Burgland qualified for expedited reimbursement from the state. About 600 pharmacies in the state qualify for more speedy payments, which stipulates that the business must be paid within 25 days, Reynolds said.

“Twenty-five days helps a lot, but it’s still a long time to wait,” Reynolds said.

Burgland did about $250,000 worth of business with the state in 2012, according to the comptroller’s office. He said he has considered lessening the amount of his business dealing in public aid, but eventually decided otherwise.

“It could be a lot worse,” he said. “Part of what I do could be considered a public service, but it would be nice to be paid faster. I’m not complaining too often.”

One pharmacy owner in Peoria did scale back his public aid business.

Mike Minsinger of Alwan Pharmacy said about one-forth of his business is with public aid prescriptions, which is less than it was in the past after his business suffered because of the backlog in payments.

“They just don’t have the money,” Minsinger said of the state. “We diversified our business a couple years ago. Public aid patients account for less of our business than even two years ago.”

Minsinger said he has had to wait up to 120 days for a payment. Despite that, he said his business has stayed steady, and he even opened a second store in Morton last summer.

To keep his business afloat in lean times, Minsinger kept a cash reserve, but even that wasn’t enough at times.

“That reserve was getting a little bit low,” he said. “We went out and got a line of credit, but we didn’t use it. It was out of extreme caution.”

Local legislators have said paying down some of the backlogged bills is a priority in the current legislative session, but finding a solution to the state’s unfunded pension system has taken priority.

Januari Smith, communications manager for the Department of Health Care and Family Services, said solving that problem will help ease the unpaid bills problem.

“A backlog of payments to providers is not unusual or uncommon,” she said. “It won’t get fixed until the pensions get reformed.”

About this series
Reporters from GateHouse Illinois newsrooms examine the real-world effects of the state’s failure to pay its bills. Each Monday, we’ll share the stories of those affected.

By the numbers
$6,595,506,612.12?: General fund payments backlogged as of March 31
162,547: Total vouchers delayed

Source: Illinois comptroller
Note: Includes vouchers and transfers to other state funds

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